Martprop Property Fund's (MTP) distributable income of R97.9 million for the second half of the year to July 31 2006, reflected the much improved performance from the fund's property portfolio.
 
This distribution, equating to 13.5 cents a unit, was 8% higher than the interim payment for the six months to January 31.
 
The fund said it was confident that unitholders can expect distributions to grow in line with sector expectations in the years ahead.
 
To be renamed SA Corporate Real Estate Fund in October, Martprop also reshaped its portfolio during the year. It sold properties for R36.6 million and acquired industrial, office and retail properties, at yields ranging from 9.4% to 11.3%, for R302 million. Investments totalling R104 million in two new retail developments, Umlazi Mega City in Durban and Highland Mews in Witbank, generated income yields of 11.4% and 10.5%, ahead of that expected on a direct investment basis.
 
Managing director Roger Perkin said the improved performance signalled the end of the negative rental reversions which had constrained earnings and distribution growth in recent years. Rental growth attributable to the core portfolio had been sustained by strong underlying property fundamentals.
 
"The negative rental reversions of two significant leases did impact on the second six months, but the balance of the portfolio performed very well to deliver this overall growth."
 
Vacancies of 1.5% in the R2.6 billion portfolio indicated a strong demand for good quality, well located assets.  During the year the fund concluded leases to a value of R404 million and recorded a retention of 83% of all leases that expired in that period.
 
Perkin said the fund's 100 industrial properties, 63% of the portfolio, accounted for R143.7 million of the net property income, retail, 28% of the portfolio, contributed R63.2 million,  and offices, 9% of the portfolio, contributed R19.3 million.
 
The portfolio outperformed both the listed fund benchmark and the Investment Property Databank (IPD) universe benchmark for 2005, with a total return of 34.4% against the universe return of 28.8%. The fund's industrial properties delivered a total return of 40.5%, underpinning the portfolio's strong performance against the benchmark.
 
Perkin said the fund's net asset value had increased to 287 cents a unit from 258 cents a unit a year ago.  Borrowings of R538 million, 21% of the value of the portfolio, were relatively low and attracted interest of an exceptionally competitive rate of prime less 2.3%.
 
Looking ahead, he said property fundamentals remained strong. The portfolio was well positioned for rental growth and there was a strong pipeline of investment opportunities.
 
"The properties acquired during the year are well let to national tenants and offer sound income growth for unitholders in the long term. Umlazi Mega City and Highland Mews will contribute positively to rental earnings and growth in the fund."
 
Martprop will take transfer in September of two Gauteng properties, acquired for R65 million. These were offices leased to Absa Bank Limited and an industrial property leased to Nampak Ltd.
 
The completion of a R70.9 million distribution and warehousing complex for the Fuel Group in the Western Cape at the end of August would generate an initial yield of 10.25%.
 
Perkin said the pending change in name to SA Corporate Real Estate Fund identified with its new direction as it pursued active expansion and positioned itself to attract significant domestic and foreign equity investment. The change follows the acquisition of the fund's management company by Old Mutual Property Group.

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Source: I-Net Bridge